New-home sales made up lost ground after four consecutive monthly declines, perhaps because some buyers rushed to lock in a mortgage before rates went up again.
WASHINGTON – After four consecutive monthly declines, new home sales posted a solid gain in May as some buyers rushed into the market before the Federal Reserve’s anticipated June interest rate hike.
Sales of newly built, single-family homes in May increased 10.7% from an upwardly revised reading in April, according to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
“While sales were up in May, the 696,000 pace was 5.9% lower than a year ago – and new home sales on a year-to-date basis are down 10.6% thus far in 2022,” says National Association of Home Builders (NAHB) Chief Economist Robert Dietz. “Moreover, the months’ supply measure is elevated at 7.7, but existing home inventory remains very tight, and this supports demand for new construction.”
A new home sale occurs when a sales contract is signed or a deposit accepted. The home can be in any stage of construction: not yet started, under construction or completed. The May reading is the number of homes that would sell if that one month’s pace continued for the next 12 months.
New single-family home inventory remained elevated at a 7.7 months’ supply, up 42.6% over last year, with 444,000 available for sale. However, only 8.3% of new home inventory is completed and ready to occupy. The remaining have not started construction (25.9%) or are currently under construction.
The median sales price for a newly constructed home actually declined in May, however, – down $449,000 from $454,700 in April. Year-to-year, the price is up 15%, due primarily to higher construction and development costs, including materials.
Regionally, on a year-to-date basis, new home sales fell in all four regions, down 3.8% in the Northeast, 21.7% in the Midwest, 12.3% in the South and 2.2% in the West.
“Though new home sales registered a solid increase in May, we expect sales to decline in June following the Fed’s action to significantly raise interest rates in an effort to cool the economy and ease inflation,” says Jerry Konter, chairman of the National Association of Home Builders (NAHB).
“High construction costs and rising mortgage rates are pricing many buyers out of the market,” adds Konter. “Only 10% of new homes were priced below $300,000 in May compared to 23% a year ago.”
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